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Are your finance resources past their use-by date?

I love words, language, and reading – and most of all, books. New or old, I love them all.

But when it comes to books spouting financial advice, it pays to check the publishing date, just like it pays to check the manufacture and use-by dates on packaged foods.

So how are financial books like cases of wine with sour milk?

In addition to your own changing circumstances, the equity and property markets, the economy more generally, taxation and company law, interest rates and foreign exchange rates are constantly changing, making specific advice less relevant by the minute. It generally takes well over a year for a book to go through the publishing process, and you can usually count on it being at least two years between the author first putting pen to paper, and the resultant book hitting the shelves.

A lot can change in two years. One of my favourite books, Your Mortgage: And How to Pay it Off in Five Years was re-released in an updated edition called Your Mortgage: The Savings Edition. Aside from a considerable expansion, part of the update was the increase in interest rates. But as it turned out, thanks to the Global Financial Crisis, interest rates lowered again, making the older edition, surprisingly, more relevant to today’s market in many ways.

When I go to the supermarket, in addition to the nutritional information label, I generally check the date and place of manufacture, looking for locally produced foods, and (after buying a few too many mouldy falafel from the corner store!) ensuring that the produce is still within it’s best-before date.

Some more of my favourite books are Cashing in on the American Dream, Early Retirement Extreme, Your Money or Your Life, and How to Retire the Cheapskate Way.

But there are two major drawbacks to this list:Firstly, they are all written by American authors, for an American audience. (Not that I have anything against Americans – it’s just that, despite all of the overlap that exists, there are still many foreign concepts and inapplicable things for non-US readers).

Secondly, while all are excellent in terms of philosophy, they tend to be woefully outdated (recommending investing in bonds for a passive income, which is virtually impossible to do at current rates), or even ignore entirely, the investment aspect. It’s hard to think of a book that covers both philosophy and investment well.

I think there’s a reason for this.

Ignoring the concept of investment may actually be preferable to addressing it in some ways. Philosophy about how to live your life, and very general principles of money apply pretty much anywhere in the world, but the specifics of investment advice tend not to stand up to the test of time, or cross borders very well.

Cashing in on the American Dream, for example, which has been out of print since the 1980s, might have made a better book today had the author left out the chapter on investing, reducing it to 10 instead of 11 chapters. This doesn’t make it a poor book by any means – I paid rather handsomely for a secondhand copy of this book online and shipping from the US, and it was worth every penny (and to be fair, the author, Paul Terhorst, probably didn’t anticipate, back in 1988, that nearly 30 years on, someone in Australia would order the book ‘online’!) It just means that the reader should regard the advice given with a healthy dose of skepticism – much as one would sniff milk that is passed its use-by date, or bin last week’s TV guide from the paper.

Stretching my metaphor about old milk to breaking point, some books, like The Intelligent Investor, are relatively timeless. The companies they analyse sound quaint today (railroads feature prominently), but the principles remain the same. This is the wine of finance books – not only can you still drink it, even if the label looks a little old-fashioned and it’s gathered some dust, but sometimes it is better as it ages (or so I am given to understand). In the latest edition (a cherished Christmas present!) one can check The Intelligent Investor‘s claims out, reading commentary that adds to it.

Books like Cashing in on the American Dream are somewhat like a case of wine where one of the bottles of wine has been replaced by a bottle of milk. The milk (chapter 4 on investing) was absolutely fine and fit to drink during its day. Bonds were an appropriate and low-risk recommendation in their day, not anymore. But just because that one chapter has passed its use-by date does not mean you should refrain from drinking the beautifully aged wine in the surrounding chapters.

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16 thoughts on “Are your finance resources past their use-by date?”

Good points about older financial books and resources. They may contain plenty of useful and informative gems about money management but at the same time, not be up to date enough to take into account today’s financial markets or new financial concepts. This is one reason why I read reputable blogs rather than established books, because the information is pretty much current.

It’s not necessarily a “finance” book, but I always refer to Overcoming Underearning by Barbara Stanny. So much of it is about thinking differently. It’s an older book, so a few reference are outdated, but the advice is timeless.

I disagree about bonds not being useful for passive income. Yes, the rates are low, but they pay monthly, despite what the stock market does. Inflation is low so we don’t need the bond income we needed 20 years ago.

Thanks for your comment RAnn. I think whether bonds are viable for passive income will really depend on your location. I still think bonds are useful as part of a portfolio, given their comparative reliability and stability, but many of the authors who wrote about early retirement in the 80s or 90s recommended bonds primarily or solely, which I don’t think is feasible today if preserving capital and having an extended retirement is your goal – with yields as low as 0.5% and in some places even lower, you’d need $2.4 million just to get a passive income of $1,000 a month. At that kind of a rate, you could simply withdraw $12,000 a year for 200 years. Even at a more generous rate of 2%, you would need $600,000 for the same passive income – but could again just withdraw $12,000 from your capital annually and have it last 50 years even if it wasn’t earning anything. In Japan, Germany, and Switzerland for example, government bonds currently have a negative return. And in some places, bonds aren’t keeping pace with inflation. So although I wouldn’t dismiss bonds entirely, I’m afraid those glory days are behind us – at least where I live!??

I’m a big fan of the wine books – like Rich Habits and The Wealthy Barber. I think it’s better to try to teach sound foundational principles rather than relying heavily on exact examples. Those books seem to last longer.

I have the perfect example to back up your point…. a real life example:

At the age of 19, I was finished reading my “AUSSIE Head Quarters Manual”, had my plane tickets, 2,000 plus US dollars which my manual said was worth about 4,000 AUS dollars, and too much luggage. I was leaving my GF, friends, parents, jobs, and my hometown of Williamsburg VA behind for an exciting 3 months backpacking through Austrailia. I knew I was going on an adventure of a lifetime, I just didn’t know the details. In fact, all I was sure of was that I was landing in Sydney, staying at the “Big” Hostel for two nights, and the exchange rate which I still remember my manual saying it was .54 cents to the AU dollar. The manual was about a year old. Since the publication, the value of the AUD about doubled compared to the US dollar. The book said to check the current rate. But I didn’t. Anyways, case in point my financial resources were past their date of usefulness.

Despite this retarded move as a 19 yr old kid, I actually very much like finance. I have a finance degree and even a finance blog on blogger called “Young Finance Guy” which is also the blogger name I write under.

Wow Young Finance Guy! Thanks so much for sharing your story – it truly is the perfect example! I do hope you managed to enjoy my home country in any case…!! 😆🐨
I’m a strong believer in human agency – we cannot control everything that happens to us, but we do have the ability to choose how we respond to our experiences. Getting ‘burned’ like this can result in us becoming scared and withdrawing from dealing with finances, OR, as you have done, building up so it doesn’t happen again!
Somewhat off topic, but at a similarly tender age, I had a knee-jerk reaction to the GFC, when my superannuation account plummeted overnight. This prompted me to pour my meager remaining savings into cash – which was, of course, the exact *wrong* thing to do. However, it also instilled in me the importance of taking responsibility for my own financial future, and spurred me to start researching investing (taking into account the above advice of course!)
P.S. I really enjoy http://youngfinanceguy-benweb.blogspot.com – US readers in particular are encouraged to check it out! 🤠